Cotton prices to remain subdued

Cotton prices in India are expected to remain subdued in the near future. Coming to the domestic scenario, prices are likely to trend in line with the international markets as domestic prices have plunged below the international levels offering no triggers for upside movement. The main reason for this downward movement is the glut situation persisting in both international and domestic markets.The domestic cotton prices have remained below the minimum support price during most of the current cotton season and as a result, CCI has undertaken significant support operations in CY 2014/15.It is estimated that CCI has procured 20-25% of the domestic cotton production and may surpass the record volume of 8.9 million bales which were procured in CY 2008/09)

But an ICAC (International Cotton Advisory Committee) report says: ?Although the price of cotton is less attractive than its competing crops, such as wheat, maize, soy, rice and sugar, compared with a year ago, its position has improved in the last few months. The record volume of cotton stocks has put downward pressure on international cotton prices, which have averaged around 68-70 cents/lb for much of the season. Like cotton, prices of competing crops fell in August and September. However, prices for wheat, maize, and soybean recovered in late autumn and winter, while cotton continued to fall, making cotton less attractive. Then, in January and February 2015, prices for wheat, maize, and soybean all declined while cotton prices have held steady. The recent gain in the price attractiveness of cotton may mitigate the loss in area to competing crops. World cotton area is forecast to decrease 7% to 31.3 million hectares in 2015/16, and world production is projected down 9% to 24 million tons.?

Meanwhile, affected by sluggish Chinese demand, the country has exported only 4.5 million bales of cotton so far and the overall shipments are expected to fall by 29 per cent to 7 million bales in the ongoing crop year ending September, a top Cotton Corporation of India (CCI) official said. Total cotton exports from India, the world’s largest producer and second-biggest seller, stood at 9.9 million bales in the last year crop year (October-September). Exports have slowed down due to higher world stockpiles and sharp decline in demand from China, the official said. The record volume of cotton stocks has put downward pressure on international cotton prices, which have averaged around 68-70 cents per pound for much of the season, said global body International Cotton Advisory Committee, in its recent report.

The CCI, which procures cotton at government set price from farmers, said it has procured 8.69 million bales of cotton at the support price as against the target of 9 million bales in the 2014-15 crop year. "Cotton procurement is almost over. Now, we have started offloading cotton through e-auction. We have been able to sell around 5 lakh bales so far," the official added. Cotton procurement has been stopped now as domestic prices have improved and arrivals have also tapered down, the official said, adding that cotton prices have increased by Rs 1,000 to Rs 1,500 per candy (which is equal to 2.10 bales). The CCI is offloading cotton at different rates depending on variety.

The Cotton Advisory Board has pegged the country’s total cotton production at over 40 million bales in the 2014-15 crop year, as against 39.8 million bales in 2013-14. As per the latest report of the USDA, global 2014/15 cotton production is projected at 119.2 million bales, 1 per cent below last season. China and India account for half of the world crop, each contributing an estimated 30 million bales of cotton production in 2014/15. "As world prices have fallen, global production has followed and has declined for three consecutive seasons to its lowest since 2010/11, with harvested area being the second lowest in 4 years," the report said. Global yield is e